Explain the shapes of the demand curve for reserves and the supply curve of reserves
What will be an ideal response?
The demand curve for reserves shows the relationship between the quantity of reserves demanded and the federal funds rate. It is a downward sloping curve. This is because a higher federal funds rate increases the cost of holding reserves and reduces the quantity of reserves demanded by optimizing banks. The supply of reserves is determined by the central bank of a nation. Hence, it is vertical.
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An expansion occurs when ________, when ________, or when both of these occur.
A. potential output grows slowly; actual output equals potential output B. potential output grows slowly; actual output rises above potential output C. potential output grows rapidly; actual output equals potential output D. potential output grows rapidly; actual output rises above potential output.
Variance is a measure of ________ and the higher the variance, ________
A) expected profit; the greater the profit B) risk; the greater the risk C) standard deviation; greater the standard deviation D) risk; the lower the risk
An isocost line reveals the
A) costs of inputs needed to produce along an isoquant. B) costs of inputs needed to produce along an expansion path. C) input combinations that can be purchased with a given outlay of funds. D) output combinations that can be produced with a given outlay of funds.
In the classical view, flexible wage rates would assure
A) low inflation. B) high rates of unemployment. C) high secular inflation rates. D) full employment.